Mortgage and credit card borrowing is on the rise

The Momentum UK Team 23 October 2013

Growing consumer confidence is driving demand for mortgages and increased credit card spending, according to a banking body.

The British Bankers’ Association (BBA), which represents the major high street banks, said that the number of mortgage approvals rose in September. They also found that credit card borrowing outstripped repayments.

However, commentators have pointed out that these figures do not signal a return to the boom years before the financial crisis. Low interest rates, which have meant competitive deals for borrowers, have frustrated savers with diminished returns on their funds. Mortgage rates have been particularly low, and schemes like Help to Buy - which offers government backed mortgages for first-time buyers with smaller deposits - have meant that it is easier for many people to secure a deal.

The latest BBA figures show that the number of mortgages approved in September was 42,990 - up from 38,834 the previous month, and nearly 7,000 higher than the average figure for the last six months. Critics have argued that schemes like Help to Buy are creating an artificial housing bubble, leading to property price rises that are unsustainable in the long term.

David Dooks, statistics director at the BBA, welcomed the findings:

“September's figures build on the growing picture of improved consumer confidence, with stronger gross mortgage lending, rising house purchase approvals and increased consumer credit.”

However, while the BBA talks about increased consumer confidence, one mortgage broker suggested that many are still adopting a more cautious approach. Mark Harris, chief executive of SPF Private Clients, said:

“There remains a strong trend for borrowers to overpay on their mortgages, taking advantage of low interest rates and paying down debt where they can,

“Confidence may be growing in the housing market but homeowners are reluctant to take on more borrowing while there is still uncertainty with regard to the economic and jobs' climate.”

Although consumer confidence may be increasing, the news of energy companies significantly increasing their bills, and the continuing trend of living costs rising faster than wages, means that many people are still being careful with their cash.